Exxon may return to Venezuela? Or is this a telephone game?

Telephone game time: I cite Reuters cites Kommersant citing unnamed sources saying that Rosneft is going to pay a $1 billion signing fee, or “bonus,” for its right to develop an immense oilfield in Venezuela’s Orinoco Belt. Lower down in the story it says that Exxon Mobil may partner on the project. Yes, Exxon “Nunca más volvera” Mobil. In Venezuela.

Curious stuff:

MOSCOW Oct 8 (Reuters) – Russian state-controlled oil giant Rosneft will pay $1 billion for access to Venezuela’s Carabobo 2 block and may tie-up with a partner to develop the project, Russian business daily Kommersant reported on Saturday…

Rosneft will pay an initial $600 million for the right to develop the oil field, with a $400 million payment to follow after the final investment decision is taken, Kommersant quoted sources close to the deal as saying.

The paper also said that PDVSA will have 60 percent of the venture, while Rosneft, with a 40 percent stake, may seek a partner to help it develop the project.

“It may well be our strategic partner — ExxonMobil. This step is seen logical,” the newspaper quoted a Rosneft source as saying…

A source close to Exxon told the newspaper there were no discussions with Rosneft on the possible tie-up in Venezuela…

I am terribly curious what this means — will this $1 billion come out of Venezuela’s debt to Exxon? Is this just some unnamed person talking randomly on a Saturday? Is it a misquote as a result of the excessive citation of citation of citation? We’ll see.


4 thoughts on “Exxon may return to Venezuela? Or is this a telephone game?

  1. Francisco Toro

    This is Exhibit A for why the Flaky MoU route to Faja development drives me up a wall. Let’s review the score here: they’ve just signed to set up a consortium – terms undisclosed – where one of the partners isn’t even decided yet to carry out an investment that doesn’t have any project finance lined up.

    I hate it, professionally, cuz then I gotta deal with clients pressing me to explain to them what *exactly* was signed, and when I tell them the honest truth they really must think I’m a total hack.

    I can’t imagine ExxonMobil would really come back, though. Whatever industrial secrets they had relating to Faja upgraders the government stole long ago after the 2007 expropriations. What could they possibly have to offer? And – given that the government is never ever again going to accept a deal of this kind with an arbitration clause on it – what investment protection could the bolivarians imaginably offer them that they could conceivably take seriously? Doesn’t add up…

  2. sapitosetty Post author

    That’s not quite right. All of the Carabobo bidders get the same deal. A bonus, of either $1 billion or $500 million, payable in 5 installments, each one at a milestone. 20% upon signing the contracts, 20% after committing to X, I don’t remember what, another 20% later, and the last two payments coming after the “final investment decision.” Final investment decision is a formal decision point. Chevron & Repsol aren’t there yet. So your take that this is all flakery is incorrect. It’s a pretty normal way of doing oilfield development.

    As far as ExxonMobil goes, what does intellectual property have to do with it? What do you mean what do they have to offer? How about, $10 billion cash as of the last fiscal quarter? And the project management skill to pull off the project? And a need for oil? Sounds like it could work out at some point. Exxon has never ruled out returning. It seems like the best way for Exxon to get paid and Venezuela to pretend it’s getting bonuses for oilfields, even though no cash will change hands. I don’t say it’s probable, but it’s certainly possible.

    As far as what you say about arbitration? You’re making stuff up. ALL of the projects being built are being done by companies protected by bilateral investment treaties that permit international arbitration. Why do you think Inpex and Mitsubishi set up a UK subsidiary as their agent to go sign onto the Carabobo project? You think they just like having “UK” in their name? And why did Chevron use a Danish subsidiary? For that famous Danish tax break? No, it’s because of bilateral investment protection treaties between Venezuela and the UK and Denmark.

    If you listen to the hype instead of reading contracts, you end up a sucker.

  3. westslope

    Fascinating stuff gentlemen!

    Would not the return of Exxon Mobil to Venezuela represent a huge status boost for the Chavez regime? Would it not ‘signal’ that Venezuela is still “open for business”, so to speak?

  4. sapitosetty Post author

    It would represent a huge status boost for Venezuela. It would also do for for the Chavez regime if it still exists. But I don’t think Exxon will come back while Chavez is in power.

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